Amsterdam, 28 July 2015
Operational Update for the Six Months Ending 30 June 2015
Nostrum Oil & Gas PLC (LSE: NOG) ("Nostrum", or "the Company"), an independent oil and gas company engaging in the production, development and exploration of oil and gas in the pre-Caspian Basin, today announces its operational update for the half year ended 30 June 2015. This update is being issued in advance of the release of its audited and consolidated accounts for the same period, which will be released before the end of August. The information contained in this update remains subject to review by the independent auditors.
Highlights:
Operational
· Average daily production of 44,337 boepd
· 2015 production guidance remains at 45,000 boepd
· GTU3 progressing for completion on time and on budget; completion expected before end of 2016
· On track for 2015 drilling target to complete 8 wells (6 production and 2 appraisal)
Financial
· H1 2015 revenue expected to be in excess of US$270m
· Cash position in excess of US$240m (including short-term deposits) and net debt of approximately US$720m as at 30 June 2015
· Fully funded capex programme both to maintain current production in 2015 and 2016 and to complete construction of GTU3 on time in 2016
· 32% of liquids production (7,500 bopd) hedged at US$85 until February 2016
Kai-Uwe Kessel, Chief Executive Officer of Nostrum Oil & Gas, commented:
Q2 was another steady quarter both operationally and financially. We continued to demonstrate that we have a cash generative business even at low oil prices, that we are able to maintain our production levels and meet our drilling targets even in the context of the current more difficult oil price environment. I am pleased to confirm that we have booked all export gas revenue from Q1 in Q2 and that we continue to export 75% of our dry gas. The main focus continues to be ensuring GTU3 is delivered on time and on budget, which we remain on target to meet. Whilst the oil price environment has an impact on profitability, it also highlights our low cost operating structure and the cash generative nature of our business.
Operational & Financial Update
· Another consistent half year performance, with continued steady production at the Chinarevskoye field of 44,337 boepd
· Increased revenue as a result of dry gas export revenues from Q1 booked in Q2
· Minimised operating costs
· Committed to delivering GTU3 on time and on budget, as well as further production growth in 2017
Production Split
The product split for H1 2015 was as follows:
PRODUCTS |
H1 2015 Average Production |
H1 2015 Product Mix % |
Crude Oil & Stabilised Condensate |
18,180 |
41% |
LPG (Liquid Petroleum Gas) |
4,611 |
10% |
Dry Gas |
21,546 |
49% |
TOTAL |
44,337 |
100% |
Current product destinations
Nostrum's primary export destinations for H1 2015 were as follows:
· Crude oil - Neste Oil's refinery in Finland
· Condensate - Russian Black Sea port of Taman
· LPG - Russian Black Sea ports
· Dry Gas - 75% export and 25% domestic
The Company has no current plans to change any of these export destinations.
Drilling
H1 2015 Drilling Overview
· 18 oil wells and 17 gas condensate wells were producing at the Chinarevskoye field
· 2 gas condensate wells and 1 oil well were completed during H1 2015
2015 Drilling schedule
Our drilling capex is scalable, based on oil prices. Under the current oil price, our base case drilling programme for the remainder of 2015 is to complete a further 6 wells:
· 2 gas condensate wells currently being drilled
· 1 oil well currently pending completion following sign off from the Kazakh authorities
· 2 appraisal wells will be drilled during 2015 (Chinarevskoye and Rostoshinskoye fields)
Production schedule
Based on the current drilling programme stated above and taking into account the current oil price we can provide the following production guidance. Should oil prices deviate materially the production guidance will be updated accordingly on an annual basis.
· 2015 - Approximately 45,000 boepd
· 2016 - Approximately 45,000 boepd
· 2017 - Approximately 70,000 boepd
· 2018 - Approximately 100,000 boepd
Progress on development of GTU3
Nostrum's fully financed expansion plan for GTU3 is being implemented and completion is expected to occur on time and on budget by the end of 2016, with construction costs expected to be below US$500m.
Nostrum has concluded the majority of the procurement process in relation to GTU3.
Total GTU3 expenditure is forecast to be below US$500m. The below figures reflect all payments made and future payments excluding VAT, which can be claimed back. In addition the figures below include all performance related payments for delivery of GTU3 by the end of 2016. Completion of the project is expected to occur on budget for delivery before the end of 2016:
GTU3 Expenditure |
as per 30 June 2015 |
Expenditure to date |
US$189m |
Remaining expected expenditure in 2015 |
US$169m |
Expected expenditure in 2016 |
US$134m |
Other corporate activity
During Q2 Nostrum made an approach to the board of Tethys regarding a possible offer to acquire the company. Nostrum has indicated that in connection with the possible offer it is prepared to provide interim funding to Tethys on terms at least as advantageous to Tethys as those proposed by AGR Energy to support short term liquidity for Tethys, both prior to any shareholder vote and following such shareholder vote whilst any regulatory approvals are obtained.
The possible offer Nostrum has proposed to the Board of Tethys would provide for a price of C$0.2185 per Tethys share (whether in cash or Nostrum shares or a combination of both, as determined by Nostrum). This price represents a premium of 15% to the price at which AGR Energy has agreed to subscribe for new ordinary shares in Tethys (as announced by Tethys on 1 July 2015). This price represents a premium of 46% to the closing market price of an ordinary share on the TSX of C$0.15 on 9 July 2015 and a premium of 143% to the closing market price of an ordinary share on the TSX of C$0.09 on 14 May, the day prior to the announcement by Tethys of a convertible loan financing with AGR Energy.
Nostrum is seeking a recommendation from the Tethys Board regarding its proposal and a decision to proceed with the possible offer from Nostrum in place of the arrangements with AGR Energy. Nostrum notes that Tethys has extended the period of exclusivity granted to AGR Energy. Any offer for Tethys will be subject to the completion of customary due diligence by Nostrum. However, no firm decision has been made by Nostrum regarding any offer.
Any further announcements will be made in due course as appropriate. Please see our website for the full release: www.nog.co.uk
Hedging
On 14 February 2014, Nostrum entered into a hedging contract covering 7,500 bopd (total of 5,482,500 boe) running through 29 February 2016 at nil upfront cost. Under this contract, a put was bought at US$85/bbl which protects against any fall in the price of oil below US$85/bbl.
Exploration license extension
The supplementary exploration extension licence for the Rostoshinskoye field has been signed and the exploration period extended until February 2017.
Further information
For further information please visit www.nog.co.uk
Further enquiries
Nostrum Oil & Gas PLC - Investor Relations
Kirsty Hamilton-Smith
Bruno G. Meere
Rachel Pescod
+44 203 740 7430
[email protected]
Instinctif Partners - UK
David Simonson
Anca Spiridon
+ 44 (0) 207 457 2020
Promo Group Communications - Kazakhstan
Asel Karaulova
+ 7 (727) 264 67 37
About Nostrum Oil & Gas
Nostrum Oil & Gas PLC is an independent oil and gas company currently engaging in the production, development and exploration of oil and gas in the pre-Caspian Basin. Its shares are listed on the London Stock Exchange (ticker symbol: NOG). The principal producing asset of Nostrum Oil & Gas PLC is the Chinarevskoye field, in which it holds a 100% interest and is the operator through its wholly-owned subsidiary Zhaikmunai LLP. In addition, Nostrum Oil & Gas holds a 100% interest in and is the operator of the Rostoshinskoye, Darinskoye and Yuzhno-Gremyachenskoye oil and gas fields through the same subsidiary. Located in the pre-Caspian basin to the north-west of Uralsk, these exploration and development fields are situated approximately 60 and 120 kilometres respectively from the Chinarevskoye field.
Forward-Looking Statements
Some of the statements in this document are forward-looking. Forward-looking statements include statements regarding the intent, belief and current expectations of the Partnership or its officers with respect to various matters. When used in this document, the words "expects," "believes," "anticipates," "plans," "may," "will," "should" and similar expressions, and the negatives thereof, are intended to identify forward-looking statements. Such statements are not promises or guarantees, and are subject to risks and uncertainties that could cause actual outcomes to differ materially from those suggested by any such statements.
No part of this announcement constitutes, or shall be taken to constitute, an invitation or inducement to invest in the Company or any other entity, and shareholders of the Company are cautioned not to place undue reliance on the forward-looking statements. Save as required by the Listing Rules and applicable law, the Company does not undertake to update or change any forward-looking statements to reflect events occurring after the date of this announcement.
